Employee Benefits Compliance Update

Transcription

1 Compliance SEPTEMBER 2017 Employee Benefits Compliance Update USI Insurance Services Employee Benefits Compliance Practice In this issue Federal government issues guidance for employers and plans impacted by Hurricane Harvey Court orders EEOC to reconsider ADA and GINA wellness regulations Additional mental health parity guidance issued FAQ: Can we satisfy our Summary Plan Description (SPD), COBRA notice, and similar distribution requirements by providing them electronically, such as by posting them on our intranet website or sending them by to participants, in order to save printing and mailing costs? Current status of the health plan identifier (HPID) Page

2 Federal government issues guidance for employers and plans impacted by Hurricane Harvey The DOL is encouraging employers to make reasonable accommodations when participants and beneficiaries encounter difficulty meeting deadlines for filing benefit claims and COBRA elections because of Hurricane Harvey. For certain employers affected by Hurricane Harvey, the IRS has granted an automatic extension until January 31, 2018, for filing a Form 5500 that is otherwise due between August 23, 2017, and January 31, As a result of Hurricane Harvey, the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) have issued guidance for employers and their group health and welfare benefit plans on various compliance-related issues. DOL guidance On August 30, 2017, the DOL issued guidance with respect to individuals and employers located in a county identified for individual assistance by the Federal Emergency Management Agency (FEMA) due to the effects of Hurricane Harvey. The DOL recognizes in its guidance that participants and beneficiaries may encounter difficulty meeting deadlines for filing benefit claims and COBRA elections. The DOL advises that the guiding principle for plans must be to act reasonably, prudently, and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Therefore, plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases, and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timelines. The DOL also acknowledges that there may be instances when full and timely compliance by a group health plan may not be possible. Its approach to enforcement in these situations will be marked by an emphasis on compliance assistance and include grace periods and other relief where appropriate, including when physical disruption to a plan s principal place of business makes compliance with pre-established timeframes for certain claims decisions or disclosures impossible. In addition, the DOL provided frequently asked questions for participants and beneficiaries to address benefit plan issues resulting from Hurricane Harvey, including suggestions for obtaining replacement health coverage if an individual loses coverage as a result of Hurricane Harvey (for example, because of job termination or reduction in hours of work). IRS guidance On August 29, 2017, the IRS provided an automatic extension of the deadline for filing Form 5500 for the following qualifying employers: Employers whose principal place of business is located in one of the 39 counties in Texas that constitute the covered disaster area because of Hurricane Harvey (as listed in the tax relief); and Employers not in the covered disaster area, but whose records necessary to meet the Form 5500 deadline are in the covered disaster area. According to the tax relief, qualifying employers that have either an original or extended due date for filing Form 5500 that falls on or after August 23, 2017, and before January 31, 2018, will have until January 31, 2018, to file the form with IRS. The deadline extension does not, however, apply to Form 1094 or On September 5, 2017, the IRS issued Notice , allowing employers to adopt a leavebased donation program for the relief of victims of Hurricane Harvey. Under a leave-based donation Page 1

3 program, employees can elect to forgo vacation, sick or personal leave in exchange for a cash payment that the employer makes to a charitable organization. The Notice states that IRS will not treat the cash donation under such a program as taxable income to employees, if the employer makes the donation before January 1, 2019, to a charitable organization for the relief of victims of Hurricane Harvey. Donating employees may not claim a charitable contribution deduction for the payment. In addition, IRS will allow employers to treat the cash payments as a business expense rather than as a charitable contribution by the employer. Court orders EEOC to reconsider ADA and GINA wellness regulations A federal district court found the EEOC s regulations on the level of employer wellness program incentives permitted under ADA and GINA to be arbitrary and capricious. The EEOC was ordered to reconsider those regulations. The court did not vacate the regulations pending the EEOC s review. In May 2016, the Equal Employment Opportunity Commission (EEOC) finalized its regulations on employer incentives and wellness programs. These regulations allow employers to provide incentives of up to 30% of the cost of self-only medical coverage to employees who voluntarily undergo medical examinations or provide certain medical information as part of an employer-sponsored wellness program, without violating the Americans with Disabilities Act (ADA) or the Genetic Information Nondiscrimination Act (GINA). See our May 20, 2016 Employee Benefits Compliance Alert for more information on the EEOC final rules. In October 2016 (before the rules became applicable on January 1, 2017), the American Association of Retired Persons (AARP) brought a lawsuit alleging the 30% incentives allowed by the EEOC regulations were too high to be consistent with the voluntary requirements of the ADA and GINA statutes, and that employees who cannot afford to pay a 30% increase in premiums will be forced to disclose their protected information when they otherwise would choose not to do so. AARP also argued that the EEOC had not articulated adequate reasons for reversing its previous longstanding position that in order for a wellness program to be voluntary, employers could not condition the receipt of incentives on the employee s disclosure of ADA- or GINA-protected information. The U.S. District Court for the District of Columbia denied AARP s request for a preliminary injunction to stop the rules from going into effect. However, the court did grant AARP s motion for summary judgment on August 22, 2017, on the grounds that the EEOC had failed to provide a reasoned explanation for its decision to adopt the 30% incentive levels, as a federal agency establishing regulations is required to do under the Administrative Procedure Act. AARP v. EEOC, D.D.C., No The court acknowledged that while some arbitrary line drawing may be necessary in determining where to set the incentive level, the agency must still point to some evidence in the record that reasonably supports where it chose to draw the line. The EEOC s main explanation was that the 30% incentive levels were intended to harmonize with the HIPAA regulations governing employer-sponsored wellness programs. The court did not find this persuasive, in part because the EEOC s wellness rules have different purposes than the HIPAA wellness rules, and are inconsistent in key areas. The court determined that [n]either the final rules nor the administrative record contain any concrete data, studies, or analysis that would support any particular incentive level as the threshold past which an incentive becomes involuntary in violation of the ADA and GINA. The court also pointed out that this would likely be a different case if the administrative record had contained support for and an explanation of the agency s decision, given Page 2

4 the deference courts must give in this context. But deference does not mean that courts act as a rubber stamp for agency policies. Having found the ADA and GINA rules to be arbitrary and capricious, the court remanded the rules to the EEOC for reconsideration. Although it could have vacated the EEOC s regulations, the court acknowledged that doing so would be disruptive and unfair to employers who had designed their current programs in reliance on those rules, and therefore let the rules stand pending the EEOC s review. The ultimate outcome is uncertain. The EEOC may decide to appeal the court s decision to the D.C. Circuit Court. If the EEOC complies with the court s order, it is unclear if or how it may rewrite the regulations. AARP brought its lawsuit with the goal of decreasing the permitted maximum incentives, but the EEOC likely will soon have a majority of Republican commissioners who may be receptive to employer groups calling for even more flexibility in offering incentives. It is also possible Congress could step in with legislation overriding the EEOC rules. For now, employers should, at a minimum, ensure their wellness plan incentives continue to comply with both the existing EEOC and HIPAA rules. However, they should be aware there is potential risk of private litigation by plaintiffs alleging an employer s wellness program incentives are too high to be voluntary under ADA and GINA, capitalizing on the court s remand of the EEOC rules. Until these rules have been sorted out, cautious employers may choose to be conservative in designing their wellness programs if they condition incentives on employees providing ADA- or GINA-protected information (e.g., if employees are asked to answer disability-related inquiries or undergo medical exams, or provide information about their spouses current or past health status). If you have any questions about your wellness plan design, please contact your USI representative. Additional mental health parity guidance issued In response to the 21st Century Cures Act, federal regulators have issued additional FAQ implementation guidance and a draft model disclosure form to facilitate compliance with the federal mental health parity law. The draft model disclosure form may, but is not required to, be used by participants, enrollees, and their authorized representatives to request information from their plan or issuer concerning compliance with the law s complicated non-quantitative treatment limitation parity requirements. The FAQs also clarified that eating disorders are a mental health condition, thus making their treatment subject to the mental health parity law. As discussed in our March 2017 Employee Benefits Compliance Update, employers and other stakeholders have struggled for years to understand and comply with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). While the basic premise is simple to state, how the concept is expressed in the applicable statutory language and enabling regulations is complex and laden with numerous defined terms of art. As a result, federal regulators have issued numerous interpretative pieces of guidance in the past several years and, as part of the 21st amended rule likely would not be applicable until the beginning of Century Cures Act enacted late in 2016, Congress prompted regulators to solicit feedback from the public on how to further improve disclosure of information required under MHPAEA. One such piece of guidance that was recently issued is FAQs about Mental Health and Substance Use Disorder Parity Implementation and the 21st Century Cures Act Part 38. Page 3

5 Background Simply stated, the basic premise of the MHPAEA is to require group health plans to provide parity between mental health and substance use disorder (MH/SUD) benefits and medical/surgical benefits. More precisely, however, MHPAEA requires that financial requirements (such as deductibles, copayments, coinsurance, and out-of-pocket expenses) and treatment limitations (including quantitative limits such as day and visit limits, as well as non-quantitative limits such as medical management standards, drug formularies, admission standards, and treatment protocols) imposed on MH/SUD benefits cannot be more restrictive than the predominant financial requirement and treatment limitation that applies to substantially all of the medical/surgical benefits for a given benefit classification. There are also special rules that apply in certain situations. In addition, MHPAEA imposes several disclosure requirements on group health plans and health insurance issuers. See our March 2017 Employee Benefits Compliance Update article referenced above for a fuller explanation of the defined terms of art, an example of how the parity calculations work, and some basic planning suggestions. Disclosure requirements The MHPAEA provides that a plan or issuer must disclose the criteria for medical necessity determinations with respect to MH/SUD benefits to any current or potential participant, beneficiary, or contracting provider upon request, and must make available the reason for any denial of reimbursement or payment of services with respect to MH/SUD benefits to the participant or beneficiary. In addition, for plans subject to ERISA, participants, upon request, must be provided with information about the processes, strategies, evidentiary standards, and other factors used to apply a non-quantitative treatment limitation with respect to medical/surgical benefits and MH/SUD benefits under the plan. Consistent with the direction provided in the 21st Century Cures Act and building on previously issued guidance, federal regulators provided and solicited comments concerning a draft model form that participants, enrollees, or their authorized representatives could, but would not be required to, use to request information from their plan or issuer concerning compliance with the MHPAEA s non-quantitative treatment limitation parity requirements. Eating disorder clarification FAQs Part 38 also clarified that eating disorders (such as anorexia) are mental health conditions and, therefore, treatment of an eating disorder is a mental health benefit for purposes of MHPAEA. Thus, if a plan provides any coverage with respect to eating disorders, then it must be provided in parity with medical/surgical benefits provided in the same benefit classification. Furthermore, consistent with language in the 21st Century Cures Act, the federal regulators solicited comments on whether any additional clarification is needed about the application of MHPAEA to eating disorders. Practical implications It is clear that both Congress and the applicable federal regulatory agencies are interested in improving compliance with MHPAEA. As result, educational outreach and enforcement efforts are accelerating. Thus, it is important for employers to discuss MHPAEA compliance with their carriers and third-party administrators (TPAs), and make sure appropriate plan language, testing procedures, and disclosures are in place. For example, during this renewal season, we have seen some carrier-associated TPAs specifically ask employers whether they want the plan provisions in their self-insured group health plans to conform to changes they are making in their insured plans to address the eating disorder issue discussed above. If you have questions about mental health parity, please contact your USI representative. Page 4

6 FAQ: Can we satisfy our Summary Plan Description (SPD), COBRA notice, and similar distribution requirements by providing them electronically, such as by posting them on our intranet website or sending them by to participants, in order to save printing and mailing costs? In many cases, distributing SPDs, COBRA notices, and similar disclosures electronically can satisfy applicable U.S. Department of Labor (DOL) safe harbor regulations. Under these regulations, all individuals entitled to receive a copy of the ERISA required disclosures must either (a) have access to the employer s electronic information system as an integral part of their employment duties or (b) provide advance written consent. However, there still can be instances for which disclosures should be distributed by more traditional means, such as firstclass mail. Like most notice and disclosure items under ERISA, required disclosures must be furnished in a way reasonably calculated to ensure actual receipt of the material. In addition, they must be distributed to everyone who is required to receive them, and this requirement can extend beyond active employees and their families. Thus, the determination of whether a method of delivery is satisfactory may turn on the facts and circumstances regarding the employer s workplace and workforce. In particular, there are certain general electronic disclosure requirements that apply to all recipients, including: Taking steps to ensure that the system for furnishing the documents results in actual receipt of the transmitted information; Information must otherwise satisfy the applicable content requirements; Notice of the significance of the document must be provided at the time of delivery; and Paper copies must be available upon request. In turn, disclosure may then be made electronically to any plan participant (a) who has the ability to access documents at any location where the participant reasonably could be expected to perform employment duties; and (b) whose access to the electronic information system is an integral part of those employment duties. Note, however, that this second requirement will generally not be met for employees whose access to the employer s IT system is limited to computer kiosks. Clearly there are other individuals for whom an employer cannot meet the above requirements, such as employees for whom computer access is not an integral part of employment duties, or non-active employees like COBRA qualified beneficiaries, qualified medical child support order (QMCSO) alternate recipients, and retirees. For those individuals, the employer must obtain advance affirmative consent from the individuals to receive the electronic disclosures. In all cases, the normal content and distribution timing requirements continue to apply. Since virtually all individuals do have access to an account, many employers can likely meet this consent requirement for most, if not all, intended recipients. Model consent forms are readily available. Employers might consider obtaining such consents from participants at annual open enrollments, at open enrollment of a new hire or otherwise newly eligible employee, or at other events providing for mid-year enrollments such as upon the marriage of an employee, enrollment of a QMCSO alternate recipient, or commencement of COBRA. In the rare situations where individuals have no means of obtaining a disclosure electronically or by accessing a company s website, or they do not provide consent, special steps should be taken to properly distribute required items. It is still a human resources best practice for plan administrators to mail disclosures by first-class mail to each participant s last known home address, addressed to the participant and his or her family, especially with respect to COBRA election notices. By this method, everyone living at that same residence is deemed to Page 5

7 have received the distribution, and it is easier for the employer to maintain procedures and mailing lists to prove that full distribution was made. Current status of the health plan identifier (HPID) Effective October 31, 2014, HHS announced a delay until further notice in the enforcement of the regulations pertaining to enumeration and use of HPIDs. In June 2017, NCVHS emphatically recommended that CMS rescind the 2012 regulations requiring use of HPIDs. HHS has not indicated when it will make a final decision on the future of HPIDs. In 2012, in accordance with an Affordable Care Act (ACA) requirement, the U.S. Department of Health and Human Services (HHS) proposed and later finalized regulations establishing a standard for a national health plan identifier (HPID) and provisions for implementation of the HPID. The HPID is a code intended to provide a standardized way to identify health plans in HIPAA-governed electronic transactions. Under the final regulations, large health plans were required to obtain an HPID by November 5, Small health plans were given an additional year to obtain an HPID. All health plans (regardless of size) would have been required to use the HPID in standard transactions beginning November 7, Effective October 31, 2014, HHS announced a delay in the enforcement of the regulations pertaining to enumeration and use of HPIDs. According to HHS, the delay was in response to a recommendation by the National Committee on Vital and Health Statistics (NCVHS). NCVHS, an advisory committee made up of stakeholders across the health care industry, was designated by the Health Insurance Portability and Accountability Act (HIPAA) and the ACA to advise HHS on standard transactions, identifiers, and data privacy issues. The findings and concerns leading to the NCVHS recommendations included: Lack of clear business need for the HPID in administrative transactions; Confusion about HPIDs; Concerns the HPID would supplant the NAIC Payer ID, which has been widely adopted and integrated into provider, payer, and clearinghouse systems; and Costs of modifications. In a June 2017 letter, NCVHS emphatically confirmed its recommendation that CMS rescind the regulations requiring use of the HPID for standard transactions, noting unanimous testimony by health care stakeholders that the Payer ID is sufficient for the routing needs for those transactions. The testimony further indicated that implementing the HPID now would be disruptive, costly, and counterproductive to administrative simplification. NCVHS recommended that HHS: Rescind its September 2012 final rule that required health plans to obtain and use the HPID; Communicate this intention to all industry stakeholders as soon as the decision is made, with guidance on the rescission s effect; and Continue its enforcement discretion policy until the formal rescission of the rule is published. HHS has not indicated when it will make a final decision on the future of HPIDs. Updates can be found on the CMS Health Plan Identifier (HPID) webpage. How can we help? To learn more about current benefits compliance issues, please visit us online or contact your local USI representative. This material is for informational purposes and is not intended to be exhaustive nor should any discussions or opinions be construed as legal advice. Contact your broker for insurance advice, tax professional for tax advice, or legal counsel for legal advice regarding your particular situation. USI does not accept any responsibility for the content of the information provided or for consequences of any actions taken on the basis of the information provided USI Insurance Services. All rights reserved.